Buying a first home: 7 steps to follow

1. Calculate your borrowing capacity

By analyzing your financial situation, your financial institution can help you calculate your borrowing capacity. You can also do this yourself by using a calculation tool.

2. Determine your down payment

Calculate the initial amount you’ll put down when the loan is granted.

Why make a down payment?

The down payment reduces the loan amount and the interest paid in your payments.
Before deciding on the down payment, you should assess your needs and budget.

How much will you put down?

Can you put down at least 20% of the purchase price? If your down payment amounts to 20% or more of the purchase price of your home, you may be eligible for a conventional loan and could save on mortgage insurance costs.

Is 20% of the purchase price beyond your budget? In cases where mortgage financing represents more than 80% of the value of the property, banks are required by law to obtain mortgage loan insurance coverage from the Canada Mortgage and Housing Corporation (CMHC) or Sagen^TM (formerly known as Genworth). In such cases, a mortgage loan insurance premium would be charged and could be added to the amount being financed¹. The smaller the down payment, the higher the premium.

How can I get the money for my down payment?

The down payment could come from your cash savings, investments, a gift, an inheritance or even your RRSP funds.

Have you thought about the Home Buyers’ Plan² (HBP)? It’s a federal government program designed to make the purchase of a home more accessible to the average household. If you have registered investments (RRSP), you could take advantage of the Home Buyers’ Plan and withdraw up to $35,000 from your RRSP to use as a down payment.

• Withdrawal is not taxable.
• You must start repaying your RRSP in the second year following the withdrawal.
• You have 15 years to repay what you withdrew.

Don’t have $35,000 in your RRSP but still want to take advantage of the Home Buyers’ Plan? An RRSP loan3 could help you—talk to your advisor about it.

3. Plan for additional costs

You need to plan for certain additional expenses when buying a home. Here are a few to consider:

Mortgage transaction fees

• Building inspection and appraisal fees
• Provincial taxes on the mortgage insurance premium for homes in Quebec and Ontario

Property taxes

• Municipal and school taxes
• Quebec real estate transfer tax (“Welcome Tax”)
• Adjustment for property taxes prepaid by the seller

Other expenses

• Moving fees
• Home insurance
• Home improvement (painting, interior decorating, etc.)
• Utilities (electricity, heating, etc.)

4. Request a mortgage pre-approval

In order to enhance your negotiating power and the credibility of your offer, before beginning your search, ask your advisor for a mortgage pre-approval. The mortgage pre-approval helps you establish your borrowing capacity, determine the mortgage amount for which you qualify, and guarantee an interest rate for 90 days. It can even give you a range of affordable home prices to make your house hunting easier.

5. Find your home

You can now start looking. What kind of home do you want? Would you like to live in the city or the country? Do you want to buy a new construction or an existing home? These are some of the important questions you’ll have to answer.

You can do your own research or contact a real estate agent who can help you in your search for an existing home. If you’re looking to buy a new home, you’ll have to deal directly with the builder (or the builder’s sales staff).

6. Make your offer

The offer to purchase is the document containing all the information necessary for closing the transaction.
Your real estate agent, notary* or lawyer will draw up this document, which includes the following information:

• The purchase price
• The ownership transfer date
• The property included and/or excluded from the transaction
• The conditions relating to the offer (inspection, etc.)

You can change your offer if the seller makes a counter-offer; that is, you can adjust your conditions to satisfy both parties.

7. Obtain your mortgage loan

The following are the main steps in applying for a mortgage. Your advisor will explain each one in detail at your first meeting and is there to support you throughout your home-buying experience.

7.1 Assessing your needs with the Customized Mortgage Plan

Thanks to the National Bank Customized Mortgage Plan, at your first meeting with your advisor, you will assess your needs and determine the mortgage solution that best suits your budget, risk tolerance and financial commitments.

The Customized Mortgage Plan analyzes your mortgage financing needs and identifies the solution that’s right for you.

7.2 The financing application

Your advisor assembles all the documents and information required for your application:

1. Offer to purchase
2. Proof of employment and income
3. Proof of down payment and assets
4. Assessment of mortgage insurance requirements
5. Any other required documentation (e.g., lease, proof of other sources of income)

7.3 Property appraisal

To confirm the market value of the home you’re interested in, your financial institution may ask to have the property appraised. The accredited appraiser is hired by the bank, and certain fees apply.

7.4 Loan approval

At this stage, if all the conditions required to secure your mortgage have been met, your loan will be approved and you’ll be about to become a home owner.

7.5 Registration of property by a notary*

The seller is responsible for providing the following documents to the notary:*

1. Location certificate (there may be some exceptions where the certificate is not provided by the seller)
2. Municipal and school tax bills

7.6 Signing of legal documents

You will meet with your notary* to sign the following official documents:

• Deed of sale
• Mortgage deed
• Adjustment of municipal and school taxes
• Credit agreement

7.7 Disbursement of the mortgage loan

The bank issues payment of the loan to the notary,* who then pays the seller.

7.8 Continuity of service

An advisor will provide you with ongoing support in order to meet your current and future needs, including:

1. Administrative changes (e.g., frequency and date of payments)
2. Mortgage renewal
3. Assessment of mortgage insurance requirements
4. Other financial needs (investment solutions, financial planning, trust services, securities brokerage services, financing solutions, and estate services)

1 The insurance premium can be added to your total mortgage loan. File review fees and applicable taxes on the premium must be paid separately.

2 To be eligible for the Home Buyers’ Plan, the selected home must be located in Canada, purchased or built before October 1 of the calendar year following the RRSP withdrawal and serve as the buyer’s principal residence within a year of being purchased or built. You and your spouse can each withdraw up to $35,000 from your RRSP. You have 15 years, as of the second calendar year after withdrawal, to repay your RRSP. Your annual repayment must be equal to 1/15 of the total amounts withdrawn.
* Quebec only